Originally Posted by
dawg80
Unless something has changed in the past year, the SBA does not provide loans. Only banks and other such financial institutions loan money. An "SBA loan" is actually a loan guarantee, and that is really an insurance policy for the lender. There are several different SBA loan programs, the basic one is the 7(a), which is up to a 75% guarantee toward the loan amount, should the borrower default. The lender (bank) is made whole up to that 75% threshold. However, the lender has to try to recuperate as much of the outstanding debt as possible, including seizing collateral (property) and suing the borrower for the rest. After some considerable effort the lender can turn to the SBA to be reimbursed any outstanding debt. THEN! using the power of the federal government, the SBA sues the borrower to recoup as much of the unpaid balance as possible. Usually that borrower must seek bankruptcy protection.
When fully explained all the ramifications, most would-be SBA loan guarantee borrowers opt not to pursue the loan.